binomial.py

"""
Binomial asset price dynamics model class definiton.
"""

class BinomialModel:
    """
    Initialize with the following parameters:

    R <- interest rate on cash account investment;
    u <- up movement percentage (d := 1/u);
    p <- real number btwn. 0 & 1 inclusive representing prob of up move;
    N <- number of periods in the model
    S <- price of asset at time t = 0.
    """
    def __init__(self,R=1.0,N=1,u=1.00,p=1.0,S=100):
        self.rate = R
        self.up = u
        self.down = 1 / u
        self.p_up = p
        self.p_dn = 1 - p
        self.pds = N
        self.init_price = S

    def get_prices_at(self,pd):
        """
        Get the possible prices of the asset at t=pd in
        the form of a list.
        
        Since multiplication is commutative, just need
        to generate t = pd number of elements.
        """
        multipliers = [((self.up ** k) * (self.down ** (pd-k))) \
                     for k in range(0,pd)]

        return [self.init_price * m for m in multipliers]